NZ lifts interest rates for second straight month

New Zealand’s central bank lifted its base interest rate for the second straight month Wednesday, foreshadowing more hikes as it strives to contain rising inflation. The Reserve Bank of New Zealand lifted its base interest rate 0.25 per centage points to 0.75 per cent, following a similar rise in October that ended an 18-month rate freeze.

“It remains appropriate to continue reducing monetary stimulus so as to maintain price stability and support maximum sustainable employment,” the bank said in statement.

The move was widely expected and economists predict the cost of borrowing could reach 1.5 per cent by mid-2022.

Inflation has spiked as the world economy recovers from a pandemic-induced slowdown, reaching 4.9 per cent in the year to September, far in excess of the bank’s 1.0-3.0 per cent target.

The bank said pandemic-related restrictions related to a Delta-variant outbreak in Auckland had not dampened long-term economic activity.

“Despite these lockdowns, underlying economic strength remains supported by aggregate household and business balance sheet strength, fiscal policy support, and strong export returns,” it said.